Couples and Investing: When We Agree to Disagree

Many couples are bound to disagree on how to invest their money for retirement or other long-term goals. It’s in the genes. But a good financial professional can help walk a couple through their differences and reach an understanding of their different needs.

The conflict usually starts with this: men and women have very different scripts when it comes to money, says Deborah Nixon, President and Founder, MyMoneyMindset, in Toronto. Women operate under the assumption that they will probably live a long time alone. And they are right: Two-thirds of women are single by the time they hit age 65—either because they never married, their spouses pass away, or they divorce, says Nixon. Men don’t think that way: they tend to believe they’ll have enough money to last, and they worry less about being alone.

When a couple walks into a financial professional’s office, they are likely to have very different concerns and goals. What’s the best way to handle a couple that can’t agree on the right blend of risk in their financial portfolio?

“I take a step back and try to figure out why they have a disagreement. What is the root issue? Often they don’t know the answer themselves,” says Brian Plain, a Certified Financial Planner in Oak Park, Illinois.

Identifying the emotional component of money is critical. He tries to help couples see that when it comes to money management, there’s no right or wrong. But there are solutions that work for clients so each can sleep soundly.

Focus on education.

Jane Young, a Certified Planner in Colorado Springs, Colorado, says she often finds basic education in investing can help bridge differences once a couple has a deeper understanding of the process. “I discuss how investments work so people understand what they are dealing with,” says Young. “The fear can come from a lack of understanding.”

Find common ground.

The discussion can be fraught with emotional overtones. Money expresses values. “What couples fear the most is that a disagreement can show their connection to one another is not as strong as they thought it was,” says Nixon.

Plain says he tries to uncover the emotional component of money, and then addresses it head on. “I’m not a marriage counselor,” says Plain. But he can help couples understand what they can reasonably afford under different circumstances. That can go a long way to resolving issues.

What couples fear the most is that a disagreement can show their connection to one another is not as strong as they thought it was.

Once Plain understands the goals that the couple share in common and how they differ in achieving those objectives, he breaks down the options into two different scenarios—“acceptable” and “ideal.” The “acceptable” portfolio addresses areas the couple agrees on and then pairs that with risk both can tolerate comfortably. For example, the couple may agree that they want to be sure to have enough money to visit grandkids who live far away four times a year. So that might put a couple in a portfolio of moderate risk that splits 60% in stocks and 40% bonds, balancing the potential long-term growth of stocks with stability of bonds.

Then Plain offers an “ideal” portfolio which might include a high-ticket toy for one partner—a shiny new car or boat. The ideal portfolio would also take on less perceived risk, perhaps 40% stocks and 60% bonds.

Identify the risks.

Jane Young says she tries to give the couple a more subtle understanding of risk. “The more conservative people may think it’s ‘safe, safe, safe’ if their money is in fixed income.” They don’t necessarily understand that bond funds come with interest rate and credit risk.

If both members of the couple have their own IRAs, Young says that she may allocate assets differently in each person’s account. While this tends to make the couple feel better, Young always makes clear that marital assets come under one umbrella.

Advisors may expect to encounter out-of-synch couples a lot more frequently going forward. Women are graduating from college in greater numbers and earning more. The Federal Reserve reveals that women account for 51.3% of all wealth in the U.S.

Young is beginning to see that shift already: Of her last five new client couples, it was the wife, not the husband, who set up the appointment. That’s a change from the past, she says.